Financial planner vs Own

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homer77
Posts: 19
Joined: Fri Sep 20, 2019 12:12 am

Financial planner vs Own

Post by homer77 »

Hi,

In 2011, I had 100k of savings but was a complete novice and did not have the time to learn about investing. I gave the 100k to a financial advisor who invested into variety of stocks and has made me a fine return over the last 9 years. But he charges 1.25% interest. I did a little comparison and found that had I invested the same in an index fund (VTI or VOO) in 2011 then my balance would have been about 50K less then it is today with his service. It would have been even less if I had done (60/40) ration.

Meanwhile taking the advice of many, I have continued to invest in low cost index funds over the last few years but recently contemplating giving him another 100k to invest as that would bring the fees down to 1% . I am also considering negotiating the fees with him. I think he charges a minimum of 0.5% so I was hoping I could talk him into that because it may be worth sticking with him then.

Thanks in advance...
Kookaburra
Posts: 557
Joined: Thu Apr 02, 2020 11:14 pm

Re: Financial planner vs Own

Post by Kookaburra »

What a nice little story. What exactly is your question?
Topic Author
homer77
Posts: 19
Joined: Fri Sep 20, 2019 12:12 am

Re: Financial planner vs Own

Post by homer77 »

sorry if I was not clear....but would you recommend just investing the money on my own in low cost index funds or would you go ahead and continue the ride with FA (knowing that its against the general advice). I am tempted to continue with the FA esp if he settles with lower fees but maybe I am missing something.
drumboy256
Posts: 52
Joined: Sat Jun 06, 2020 2:21 pm

Re: Financial planner vs Own

Post by drumboy256 »

Sounds to me like you don’t know how to handle money still. I would start there and then come back after some reflection and an understanding of what your risk tolerance is and retirement horizon is.
neverpanic
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Joined: Sun May 10, 2020 12:26 am

Re: Financial planner vs Own

Post by neverpanic »

It's so hard to have this sort of discussion looking in the rear-view mirror, especially coming off (in the midst of??) a raging bull market. Upon reflection, anyone could have done well the past decade with almost any strategy, but there's no reason to expect that same kind of outcome over the next 10 years. If you're a passive investor with a fairly low risk tolerance, you can safely DIY by following the general philosophy here.

That said, 50K over 10 years isn't really that much of a bonus. Yes, it's sacrilege to talk timing here, but if you have reason to believe there will be some down periods within the next 10 years, it may be worth it to keep in mind you'd still be paying 0.5-1% for someone who's barely outperforming the index.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
02nz
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Re: Financial planner vs Own

Post by 02nz »

homer77 wrote: Tue Dec 08, 2020 11:56 pm who invested into variety of stocks
Your portfolio of individual stocks was, with a very high degree of certainty, much more concentrated and less diversified than VTSAX/VTI. It was dramatically riskier than a broadly diversified index fund, so it's not a fair comparison. It worked out well and you didn't understand/see that risk, but it was there and will still be there if you choose to invest this way going forward. Coming out ahead at the slot machines doesn't mean gambling is a good idea.
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celia
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Location: SoCal

Re: Financial planner vs Own

Post by celia »

homer77 wrote: Tue Dec 08, 2020 11:56 pm I did a little comparison and found that had I invested the same in an index fund (VTI or VOO) in 2011 then my balance would have been about 50K less then it is today with his service.
What you are missing here, is that it was just as likely your balance could have been about 50K more. There's no guarantee the next 10 years will turn out the same, is there?

Let's consider if the advisor is no longer here in 10 years (he retired, moved, whatever...) Are you going to believe that the growth in the next ten years was because of "his good choices"? Or is it more likely because of the movements in the stock markets? Is it possible that you can learn enough to also make good choices during those years?

If you're ready to learn more with us, can I suggest If You Can by Berstein which is a pretty quick read. Then if you want to understand and follow the Boglehead philosophy, read one of our books from our Recommended Reading list. (You can probably borrow it for free from your local library, which is a very Boglehead thing to do.)
:D
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